Members are invited to declare at this stage
of the meeting, the nature and existence of any relevant
disclosable pecuniary or personal interests in the items on this
agenda and to specify the item(s) to which they relate.

Minutes:

In relation to Agenda items 10
and 11, Peter Gadsdon declared that he was both a Director of i4B
Holdings Ltd and First Wave Housing Ltd and the Council’s
Director of Performance, Policy and Partnerships.

3.

Deputations (if any)

To hear any deputations received from members
of the public in accordance with Standing Order 67.

The report briefly outlines the progress made
since the last update to the Committee provided in July 2018. It
details the type and number of incidents in Brent and provides some
information around initiatives and programmes of work under way to
enhance our resilience and response arrangements.

Carolyn Downs (the Council’s Chief Executive) introduced
the report which briefly outlined the progress made since the
previous update to the Committee in July 2018. Ms Downs noted that
the paper had been presented sooner than July 2019 in order to
bring it in line with the London-wide assurance and challenge
process that had been instigated. Brent had submitted a
self-assessment (available at Appendix A (pages 17-23 of the Agenda
pack)) which had been moderated at a sub-regional level. Members
heard that common themes where improvement was desirable across all
Local Authorities had been identified and a local action plan to
address these would be created with relevant guidance and support
from London Resilience. These included – humanitarian
response; community engagement and management; media and
communications management; and governance.

Ms Downs said that a specific area of work in the last couple of
months had been Brexit and the prospect of leaving the European
Union (EU) without a deal. Local Authorities across London had been
in the process of developing a risk assessment for such a scenario.
Some of the areas of greatest concern had been related to caring
for vulnerable residents and waste management and disposal. It was
noted that any additional risks associated with Brexit would be
included in the Council’s Risk Register.

The Committee welcomed the report and enquired about the amount
of time and resources officers had spent working on Brexit-related
issues; the possibility of reimbursing extra costs from Her
Majesty's Government; local initiatives to ensure continuality of
support for care and medical packages; and keeping Members informed
about new developments. Ms Downs responded that the time spent on
Brexit had not been excessive, e.g. the Council had been able to
cope using its existing resources. Nevertheless, the Government had
written to all Local Authorities to notify them of additional
funding allocated to them and Brent’s share was
£210,000. The Ministry of Housing, Communities and Local
Government had asked councils to provide advice to EU residents
about the settlement scheme that had been established and Brent had
already held a ‘Time to Talk’ event dedicated to
Brexit. Peter Gadsdon (the Council’s Director of Performance,
Policy and Partnerships) said that another ‘Time to
Talk’, focused on the consequences of the United Kingdom
leaving the EU, had been planned to take place in early April 2019.
It was noted that a dedicated seminar for Elected Members would be
organised once more information about Brexit became available. As
far as care and medical packages were concerned, Mr Gadsdon said
that he would start convening weekly meetings with officers from
the Children and Young People Department and the Community and
Wellbeing Department as well as external partners to discuss
specific implications for the health and social care
sector.

Daryl Jooste (the Council’s Civil Contingencies Manager)
acknowledged that community engagement and management had been
identified as an area for improvement in the recent self-assessment
undertaken by Brent Council. Ms Downs reminded members that during
last year’s cold weather emergency shelters had
...
view the full minutes text for item 6.

This document provides an overview of the
planned scope and timing of the

statutory audit of Brent Council (‘the
Authority’) for those charged w ith governance.

Minutes:

Sophia Brown (Senior Manager, Grant Thornton -
External Audit) introduced the paper which provided an overview of
the planned scope and timing of the statutory audit of Brent
Council for those charged with governance. She directed
Members’ attention to the key matters impacting Grant
Thornton’s audit approach of the Authority (page 29 of the
Agenda pack), among which included the wider economy and political
uncertainty; the adoption of IFRS 9 (Financial Instruments) and
IFRS 15 (Revenue from Contracts with Customers); and the
implications of Brexit. Ms Brown noted that Grant Thornton had
identified significant risks related to the revenue cycle including
fraudulent transactions (rebutted); management override of
Authority controls; valuation of land and buildings; and valuation
of the Pension Fund liability.

Danielle Swain (Audit Executive, Grant
Thornton – External Audit) reported on the audit plan of the
Pension Fund. She said that Brexit could have a significant impact
on the funding and investment strategies of pension schemes, and
defined benefit schemes were likely to face a number of regulatory
issues and uncertainties. Therefore, the Pension Fund would need to
manage potential risks by developing contingencies for different
outcomes. The significant risk identified for the Pension Fund was
incorrect valuation of Level 3 investments. Ms Swain explained that
Level 3 investments were difficult to value and the process
involved a significant degree of estimation as no comparative
investments existed.

Members heard that Grant Thornton had
determined financial statement materiality to be based on 1.85%
(previous year figure – 1.06%) of the Authority’s gross
expenditure of the group and the Authority for the financial year
and had considered ownership structures, controls and business
environment. Therefore, materiality at
the audit planning stage had been set to £20 million
(previous year’s figure - £12 million) for the group
and the Authority and £8 million (previous year’s
figure - £12 million) for the Pension Fund which equated to
1% of the previous’ year net assets for the Pension Fund. The
trivial levels[1] had been set to £1
million and £400,000 for the group and the Authority and the
Pension Fund respectively and any discrepancies exceeding the
trivial level would be reported to the Audit and Standards Advisory
Committee.

The Committee questioned why materiality
levels had been changed and Ms Brown responded that each audit firm
used its own methodology to determine materiality. The current
levels had been set up taking into consideration ownership
structures, controls and the business environment, and reviewing
the level of errors from the prior year audit of the financial
statements. In response to a Member’s question whether
materiality could be set at 1%, Conrad Hall (the Council’s
Chief Finance Officer) emphasised that while it was in the
Committee’s power to request materiality to be at 1%, but
this was likely to increase the audit fee (currently -
£153,684; previous year’s figure - £199,590) and,
therefore, such a suggestion should be carefully considered prior
to making a formal decision.

Benjamin Ainsworth (Head of Finance, Brent
Council) introduced the report and reminded Members that the
Council was required to adopt accounting policies each year to set
out how the Statement of Accounts would be produced. The Accounting
Policies presented in Appendix A (page 47 of the Agenda pack) had
been based on the previous year’s ones with some minor
changes to cover new accounting standards, clarify terminology and
to align the policies with the latest version of the Code of
Practice and underlying financial standards. Mr Ainsworth informed
members that the accounting policies could be changed only in
specific circumstances which had been outlined in paragraph 3.3 of
the report (page 44 of the Agenda pack).

Members welcomed the report and enquired
whether potential clawback of grants had been considered. Mr
Ainsworth explained that a key element of Brent Council’s
approach to the Policies had been that the Council applied the Code
of Practice issued by the Chartered Institute of Public Finance
Accountants (CIPFA). He said that clawback of grants had been a
very rare occasion. Conrad Hall (the Council’s Chief Finance
Officer) added that section 2.4 of the Statement of Accounting
Policies (page 48 of the Agenda pack) set out the Council’s
approach to revenue grants and the Local Authority had reasonable
assurance that it would comply with the conditions attached to
grants so there would be any repayments.

Daniel Omisore (Head of Finance, Brent
Council) introduced the report which set out the draft Treasury
Management Strategy for 2019/20. He informed Members that the final
version, incorporating the views of the Committee, would be
included in the budget report presented at the Full Council meeting
on 25 February 2019.

In relation to the external context, it was
noted that the United Kingdom’s (UK) progress negotiating its
exit from the European Union (EU), together with its future trading
arrangements, would continue to be a major influence on the
Council’s Treasury Management Strategy for 2019/20. In
addition, the big four UK banking groups had divided their retail
and investment banking divisions into separate legal entities under
ring-fencing legislation and European banks had been considering
their approach to Brexit (for details please see paragraphs 9 and
11 of the report respectively (page 64 of the Agenda pack)).

As at 31 December 2018, the Council had held
£397 million of borrowing and £114 million of
investments, with future estimated borrowing requirements set out
in Table 1. Mr Omisore noted that there had not been any breaches
of the Treasury Management Strategy or Prudential Indicators since
it had been agreed by Council last year. In the past 12 months, the
Local Authority’s investment balance had ranged between
£190 and £89 million. However, it was forecast to
decline as the Councils began the implementation of its updated
capital programme.

Members enquired about the repayment of one of
the Council’s Lender Option Borrower Option loans (LOBOs),
the impact of a potential collapse of property prices on the
Council’s stock and the impact of Brexit on the cost of
borrowing. Mr Omisore said that the Council had managed to secure a
favourable deal with a lender which had saved the Local Authority
money and had contributed to lowering its debt position.

Although the existing Investment Strategy had
provisions for purchasing shares in companies that invested mainly
in real estate, this option had not yet been taken up. However, this is constantly monitored and should
circumstances change, officers would consider this, depending on a
number of factors and after undertaking appropriate due diligence
prior to making a decision. This also applied to any investments
with Registered Providers which would be individually assessed and
discussed with Arlingclose, the Council’s advisors, prior to
investing. A significant proportion of the Council’s
investments constituted short-term lending to local authorities
which was in line with the Council’s 2018/19 Investment
Strategy. This had been seen as a secure form of investment which
provided benefits for both sides. Moreover, Arlingclose provided
real time updates and ratings on all categories of investments
which were constantly monitored and reviewed. As far as the
implications of Brexit on the cost of borrowing were considered,
Conrad Hall (the Council’s Chief Finance Officer) said that
the Local Authority was taking advice from Arlingclose, as of
course it was not possible to predict with certainty future changes
to interest rates. In his view, given the likely short-term
macro-economic impact of a ...
view the full minutes text for item 9.

Peter Gadsdon (Director, i4B Holdings Ltd)
introduced the report which provided an update on i4B Holdings Ltd
(i4B) recent performance, proposed 2019/20 Business Plan, audit
arrangements and risk register. He highlighted that the same
Directors sat on the Board of the Council’s other wholly
owned company – First Wave Housing Ltd (FWH). Two of them
were Council Officers (Gail Tolley, Strategic Director of Children
and Young People and Peter Gadsdon, Director of Performance, Policy
and Partnerships), one was a backbench Elected Member (Councillor
George Crane) and two were independent. The main purpose of the
Company had been to assist the Council reduce homelessness by
providing affordable, good quality homes, while delivering
regeneration and financial benefits to the Council.

Business Plan

The Committee heard that the version of the
2019/20 i4B Business Plan that had been included in Appendix 1 to
the report (page 89 of the Agenda pack) was identical to the one
that would be presented to Cabinet for approval on 11 February
2019. It contained a five-year forecast for the operation of the
Company, including a risk analysis and a financial analysis in the
context of changing market conditions and Brexit. Mr Gadsdon
reported that the acquisition of properties had not been at the
pace originally envisaged and the main reason for this was related
to the changing market conditions. Nevertheless, the Company had
been able to purchase a greater share of in-Borough properties at
lower prices than predicted, but the property supply was
decreasing. The majority of units were flats and a large proportion
of properties were leasehold which meant that additional costs,
such as ground rent and service charges, had been added to the
Business Plan.[1]

The Board had held discussions with the
shareholder about potential ways in which the Company could
contribute to meeting housing targets in the Borough. It had been
proposed to divert a proportion of the money to buy new build homes
on Council ground. Conrad Hall (the Council’s Chief Finance
Officer) said that building Council housing had become more
feasible after the Housing Revenue Account cap had been removed and
changes in the Right to Buy legislation had been made. Furthermore,
increasing the share of properties in Brent and the surrounding
areas had been considered as it had been difficult to place
residents outside of the Borough. It had been envisaged that the
current demand for out-of-Borough accommodation could be met by
acquiring 10 properties in addition to the 70 that had already been
purchased. The total number of units to be acquired would not be
changed and that it would not be necessary to amend the financial
requirements of the programme over the 30-year period.

As the Business Plan proposed using a portion
of agreed funding for intermediate rented accommodation to support
the purchase of one block of 153 units for the provision of key
worker accommodation at 60%-80% market rent, i4B would work with
the Council’s housing supply and partnerships team to develop
this opportunity.

Peter Gadsdon (Director, First Wave Housing
Ltd) introduced the report which provided an update on First Wave
Housing Ltd (FWH) recent performance, proposed 2019/20 Business
Plan, audit arrangements and risk register. He pointed out that the
Company had been more mature than the Council’s other wholly
owned venture – i4B Holdings Ltd (i4B) and provided a
background to its operation. Members heard that FWH owned 329
residential properties and two commercial premises (for more
details on the rent levels and the products offered by the Company,
please see Table 1 on page 187 of the Agenda pack). In terms of
types of units, approximately 1/3 of FWH portfolio consisted of
Brent-owned blocks (Right to Buy bought back-s); 1/3 were other
leasehold properties and 1/3 were had been situated in two large
blocks in South Kilburn that had been acquired as new
builds.

Mr Gadsdon said that a major concern for the
Board had been the condition of the stock which had deteriorated
due to the lack of investment in the last 10 years. Therefore, a
substantial amount of refurbishment work would have to be carried
out in order to bring it to the required standards. There were an
average of six repairs per property in the last 18 months which was
considered high for the industry, while customer satisfaction had
been as low as 51%. Nevertheless, the Company was in a strong
financial position as rent collection had been good and the value
of the properties it owned had increase since they had been
purchased.

The Committee welcomed the report and enquired
whether there were any differences between i4B and FWH in relation
to occupancy and voids. Mr Gadsdon responded that rent collection
rates for FWH were monitored on a monthly basis at Board Meetings
and had remained consistent at around 100%. Turnover was very low
and there were no void properties. Therefore, the Board drew
confidence from FWH that i4B would perform well once the programme
had been fully developed.

Members referred to the fact that the report
commented that the shareholder was undertaking an analysis of the
benefits of aligning the two companies. Conrad Hall (the
Council’s Chief Finance Officer) explained that under the
present arrangements FWH was a registered provider which meant that
it could bid for grants from the government to build properties. He
highlighted that while it was important to retain the registered
provider status, it had to be taken into account that having
different types of companies performing various functions could
make governance arrangements complicated.

RESOLVEDthat:

(i)The contents of the Report on First Wave Housing
Ltd, be noted;

(ii)The plans set out in the Company’s draft
2019/20 Business Plan be noted;

Michael Bradley (the Council’s Head of
Internal Audit and Investigations) introduced the report and said
that a new Internal Audit Charter (Appendix 1 on page 225 of the
Agenda pack) had been produced in accordance with the Public Sector
Internal Audit Standards. It provided a detailed outline of the
role of Internal Audit and how the Strategy and Plan would be
delivered whilst ensuring compliance with the standards.

It was noted that reviewing the Charter by the
Audit and Standards Advisory Committee on an annual basis was
considered good practice. The Chair added that there were regular
meetings between himself, the Vice-Chair and Mr Bradley, while
members of the Internal Audit Team had direct access to the Chief
Finance Officer.

RESOLVEDthat:

(i)
The contents of the Annual Review of the Internal Audit Charter
report, be noted; and

(ii)
The Internal Audit Charter be approved in accordance with the
requirements of the Public Sector Internal Audit Standards.

Michael Bradley (the Council’s Head of
Internal Audit and Investigations) introduced the report which
provided an update against the Annual Audit Plan for the period 1
September 2018 to 31 January 2019. He highlighted that a further
seven schools[1]had
been engaged and the proportion of recommendations that had been
implemented was high. However, there was a low return rate of
questionnaires issued at the end of each audit asking auditees to
provide feedback on a number of areas including usefulness of the
audit, quality of the report and usefulness of any recommendations
made. Nevertheless, the Internal Audit Team would continue to
encourage clients to provide feedback on the service.

Mr Bradley referred to Appendix B (page 274 of
the Agenda pack) which contained information about follow up
reviews of Audits that had been completed. He emphasised that
although the assurance rating of the Payroll audit remained
‘Limited’ significant progress had been made towards
resolving the issues that had been identified. Furthermore, the
number of not implemented management actions in relation to the
Direct Payments audit was zero and not seven. In response to a
Member’s question about the South Kilburn Regeneration audit,
Mr Bradley said that it had been focused on project assurance and
its rating had initially been ‘Limited’ as there were
issues with some of the components of effective project
management.

Members directed their attention to the
Internal Audit Planning process for the next financial year
(paragraphs 3.17-3.26 on pages 240-242 of the Agenda pack) and Mr
Bradley pointed out that resources had been concentrated on areas
of high risk. Conrad Hall (the Council’s Chief Finance
Officer) said that a draft Internal Audit Plan would be presented
at the meeting in March 2019 to allow the Committee to comment on
it. He encouraged Members to raise any specific concerns with
himself, Mr Bradley or Colin Garland (the Council’s Audit
Manager) so these could be reflected in the Plan.

The Committee welcomed the report and
supported the proposed allocation of resources. The Chair commented
that ‘Limited’ assurance audits showed that the right
areas of the Council had been targeted and the work of the Internal
Audit Team was addicting value to the organisation.

RESOLVEDthat:

(i)The contents of the Internal Audit Progress Report
for the period September 2018 to January 2019, be noted;

(ii)The proposed allocation of resources in the Internal
Audit Plan 2019/20 be approved;

(iii)Members raised any specific concerns with Mr Hall,
Mr Bradley or Mr Garland (the Council’s Audit Manager) so
these could be reflected in the Plan.

[1]It was
noted that the Internal Audit Team did not audit academies which
had separate audit arrangements.

The report provides an update on the counter
fraud work undertaken for the period 1 April 2018 to 31 December
September 2018 (Quarters 1-3).

Minutes:

Michael Bradley (the Council’s Head of
Audit and Investigations) introduced the paper which provided an
update on the counter fraud work undertaken for the period 1 April
to 31 December 2018. He pointed out that 15 properties, with a
notional value of £1,395,000, had been recovered in the year
to date as a result of fraud or irregularity.

The Counter Fraud Team had led on an organised
Freedom Pass fraud investigation involving several Councils in
London. 17 fraudulent Brent applications had been uncovered and the
main subject of the investigation had in court on 26 June 2018
relating to 21 counts of fraud, counterfeiting and forgery.
However, the defendant had pleaded not guilty and the trial was
scheduled for March 2019. Moreover, the Team had worked on a
notable Blue Badge fraud case which had appeared in national news.
The defendant had pleaded guilty and had been fined £660, had
to pay costs of £572 and a Victim Surcharge of £66. In
response to a question whether the Blue Badge cases that had been
investigated had involved third parties using fraudulent Blue
Badges in Brent, Mr Bradley said that he would seek additional
information from the Team and would share it with Members at the
next meeting. He commented that the amount of money defendants had
been sentenced to pay had been low in comparison to the cost of
prosecuting cases. A Member of the Committee suggested that the
matter could be referred to the attention of the Local Government
Association (LGA) via the Lead Member for Regeneration, Highways
and Planning.

Conrad Hall (the Council’s Chief Finance
Officer) supported such an approach as he considered it to be an
effective way of addressing the issue as prosecuting Blue Badge
fraudsters often cost the Local Authority more than it could be
recovered, especially when the social cost of the fraud and the
loss of revenue from parking were taken into account.

(ii)
The issue that the amount of money defendants had been sentenced to
pay had been low in comparison to the cost of prosecuting cases of
Blue Badge fraud be brought to the attention of the LGA via the
Lead Member for Regeneration, Highways and Planning; and

(iii)The Committee’s appreciation for the work of
the Counter Fraud Team be placed on record.

The report provides options for the conduct of
an assessment of the performance of the Audit and Standards
Advisory Committee.

Minutes:

Michael Bradley (the Council’s Head of
Audit and Investigations) introduced the report which outlined
potential options for the conduct of an assessment of the
performance of the Audit and Standards Advisory Committee. He
pointed out that three main approaches had been considered –
completing a questionnaire; organising a workshop; and conducting a
peer review.

Members welcomed the update and the Chair
commented that he would prefer the option that included conducting
a peer review, however, he acknowledged that it could be
challenging to organise one having in mind the difficulties
encountered when Members and officers had expressed interest the
Council’s internal audit function to be reviewed externally.
Members felt that completing a questionnaire might be the most
suitable way to conduct the self-assessment as long as senior
Council officers, Committee Members, external auditors and key
stakeholders had been included in the scope.

In response to potential actions that would be
taken to address weaknesses that could be identified as a result of
the process, Conrad Hall (the Council’s Chief Finance
Officer) explained that should the self-assessment highlight
specific shortages, training and coaching would be considered. If
this approach did not deliver the expected results, conversations
with the respective political group leaders would be held to agree
a way forward.

Mr Hall informed Members that he would liaise
with Mr Bradley to design the questionnaire and would report back
to the Committee. The Chair requested results to be treated
anonymously so respondents could provide honest feedback about
areas that worked well and aspects which required improvement

To note the Committee’s Forward Plan and
agree a draft agenda for the next meeting, which would be reviewed
and finalised by the Chief Finance Officer, the Head of Audit and
the Chair of the Committee one month after the date of the current
meeting.

Minutes:

It was noted that officers
would try to distribute the workload of the Committee evenly
throughout the 2019/20 Municipal Year.

<TRAILER_SECTION>

RESOLVEDthat the contents of the Audit Advisory Committee
Forward Plan, be noted.

17.

To agree a date to hold a meeting between the Chair, the Vice-Chair and the Independent Members of the Committee

RESOLVEDthat press and public be excluded from the remaining
part of the meeting.

19.

Matters Arising (continued)

Minutes:

Independent
Advisor to the Committee

Conrad Hall (the Council’s Chief Finance Officer) informed
Members that the recruitment of an Independent Advisor to the
Committee was in progress and a panel would be convened to
interview the shortlisted candidates. It was noted that there was a
possibility that a recommendation for appointment would be made
prior to the Committee meeting on 20 March 2019.

Lender Option
Borrower Option Loans

Mr Hall explained the nature of
Lender Option Borrower Option Loans (LOBOs) and said Brent had
taken out its last LOBO more than 10 years ago. He referred to the
objections to the Council’s accounts that had been received
in relation to LOBOs and said that KPMG (the Council’s former
external auditor) had issued their provisional view and the
objector and the Council had been given the opportunity to present
further evidence within 20 working days. KPMG would then take into
account whether the points that had been raised were substantive
and would issue their final view. Once this had happened, the
objector could not raise any further points of legality unless they
took their objection via appeal to the court system at their
expense within 21 days.

An update on this matter would
be provided to the Committee once it became available.

20.

Any other urgent business

Notice of items to be raised under this
heading must be given in writing to the Head of Executive and
Member Services or his representative before the meeting in
accordance with Standing Order 60.